Unilever Plc sales beat estimates as the company lifted prices of products like Dove soap and Knorr stock cubes even as it reported signs that overall inflation is easing.
(Bloomberg) — Unilever Plc sales beat estimates as the company lifted prices of products like Dove soap and Knorr stock cubes even as it reported signs that overall inflation is easing.
Sales advanced 7.9% on an underlying basis in the second quarter. The company forecast a dramatic slowdown in its cost inflation to about €400 million ($443 million) in the second half from about €1.5 billion in the first half. The stock rose as much as 4.5% in London.
Investors are scrutinizing the first set of results under Chief Executive Hein Schumacher for hints of his strategy to revive Unilever’s sluggish performance. The new CEO raised full-year forecast slightly, predicting revenue growth of more than 5% this year. The guidance may be conservative, as analysts are forecasting 6.1%.
The company chose an external CEO to help fix its bureaucratic culture and deal with critiques that it has become too focused with the so-called “social purpose” of the consumer products it sells. Schumacher, the former boss of Dutch dairy cooperative Royal FrieslandCampina, is expected to revisit the debate over splitting food brands like Hellmann’s mayonnaise from the faster-growing personal care, beauty and wellbeing units.
The best performing businesses were personal care, nutrition and beauty. Ice cream was Unilever’s slowest growing division with underlying growth of 5.6% even as prices rose more than 12%.
Unilever forecast its own pricing to moderate throughout the year. In the UK, consumer price inflation eased to 7.9% in June from 8.7% in May, while double-digit increases in grocery prices have also edged lower.
“This was an excellent sign off by now ex-CEO Alan Jope,” wrote RBC analyst James Edwardes Jones.
What Bloomberg Intelligence Says:
“Unilever’s 1H beat may cool suggestions that a breakup of the company is needed and defies the consumer-pricing squeeze, with 2Q organic-sales growth of 7.9% (consensus 6.6%). The gains were all price driven, and volume decline was limited to 0.3%, with market share intact. Moderating pricing in 2H could see volume rise, lifting share and profitability. A 90-bp beat on adjusted operating margin in 1H was a category-wide contribution.” — Deborah Aitken, BI consumer-goods analyst
(Updates with analyst comment in final paragraph)
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